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Posted on Feb 23, 05:59PM | IBNS
New Delhi, Feb 23 : India Inc is largely divided on the issue of super rich tax but majority of those sampled by ASSOCHAM said it would turn out to be a 'tax-and-spend' shot for the government while the business sentiment could take a hit.
Also, they said the focus and public debate should shift from "super tax "to "super growth", which alone is the solution to both the fiscal deficit and economic inequalities.
However, there are others among the industry leaders who said they can live with the super tax as long as it is short-term levy in the form of a surcharge for one or two years at the most.
The ASSOCHAM sent a questionnaire to 85 CEOs and senior executives across different sectors and different cities.
As many as 61 per cent of them said, the move is ill-advised since it would act as a disincentive on wealth and value creation.
Besides, it is against the spirit of promoting free enterprise and also goes against often repeated quote, which Prime Minister Manmohan Singh refers to.
The Prime Minister often refers to the "animal spirit" of the Indian enterprise which will certainly be ruffled in case the so-called rich tax is imposed, they said.
But on the other side of the scale, 39 per cent of the respondents said they can live with such a levy but it should not be made a permanent feature.
Almost all of them said that India has come a long way from a time when creating wealth was considered to be bad.
"Profit making and wealth creation are essential attributes of a business enterprise, we need not stifle these attributes, just because the economy is facing bad times. There are several other ways to return to the fiscal prudence - cutting the wasteful expenditure, leakages in untargeted subsidies," the ASSOCHAM survey report said.
The idea of tax-and -spend is being shunned all around the world. Instead, the focus should be on better tax administration, reduction in non-plan public expenditure and improvement in quality of governance.
Besides, a host of high profile corruption scandals also do not enthuse the public to pay more taxes, as a feeling is gaining ground as if the taxpayers' money is pilfered.
The study noted that one of the reasons for taxpayers to pay grudgingly is poor quality of public services that they receive.
"If public health is provided at affordable prices in as efficient manner as in private hospitals and government run schools provide education at par with the public schools, people of the country would willingly pay taxes," the study said.
Moreover, what is quality of other public services being provided, be it roads, electricity, public transport...there is a lot more desired.
The industry leaders also ask whether the business infrastructure like roads, ports and government clearances would improve once the so-called super tax is levied.
One of the respondents said, "If I buy a business class ticket in an airline, I get extra comfort. If I pay super rich tax, at least I should get a minimum standard of public service."
So far the responsibility of the super rich towards is concerned, wealth creation would necessarily involve employment generation and contribution to the government exchequer in any case.
The paper also noted that it was thanks largely to a "super growth" that had resulted into a buoyant tax revenues up to 2009-10. The focus should thus be on super growth, the paper said.
Agreeing, ASSOCHAM President Rajkumar Dhoot said, "The industry expects the Finance Minister to give us a growth-oriented budget which promotes investment and revival of the economic sentiment. The so-called super rich tax will not yield much. Besides, the best way to remove social and economic inequalities is to keep growing at nine-10 per cent for a decade."